Fears of a double-dip recession following weak economic data roiled global markets
Indian stocks are likely to witness a gap-down opening following a rout in the US markets on Thursday with the three major indices in the negative territory for the year. The plunge was on account of the poor shape of the nation’s economy and renewed debt concerns from Europe. Tracking the gloomy US markets, the Asian pack was trading with deep cuts in early trade on Friday. The SGX Nifty was down a huge 158 points at 5,182 compared to its previous close of 5,340.
A positive closing on the US market on Wednesday helped the indices open higher yesterday. However, fresh inflation data dented the gains in the first half of trading and a drop in European shares on weak economic data pulled down the indices further in late trade.
The Nifty opened seven points higher at 5,412 and the Sensex started the day at 17,984, up 43 points over its previous close. PSU, banking, realty and metal stocks were in demand in early trade. The indices rose to the day’s high in the first hour, with the Nifty touching 5,435 and the Sensex at 18,033.
However, the market soon slipped into negative terrain, then stayed range-bound, hovering on both sides of the neutral line till around noon. The steep rise in weekly food inflation data to 8.04% for the week to 23rd July from 7.33% in the previous week, pushed the market into the red, and all sectoral indices traded lower.
The indices fell to their intra-day lows in late trade, as key European markets pared initial gains and slipped into the red. At the day’s low, the Nifty was down to 5,323 and the Sensex touched 17,665. The market settled a tad above these levels, with significant losses for a third day in a row. The Nifty closed at 5,332, down 73 points, and the Sensex declined 247 points to 17,693.
Markets in the US plunged overnight with the Dow seeing its worst one-day fall since December 2008. All three major indices are now in the negative for 2011. Concerns bout the deteriorating economy fresh worries about the debt crisis in Europe led to the decline. European Central Bank president Jean-Claude Trichet’s comments that “downside risks have intensified” led the region’s key indices lower on Thursday.
Although initial claims for state unemployment benefits fell by 1,000 to a seasonally adjusted 400,000 last week, fears of another recession loomed large. The non-farm payroll report, to be announced on Friday, will be keenly watched.
The decline in stocks also resulted in a fall in crude and gold on fears that the slowdown will cut demand for commodities.
The Dow tumbled 512.46 points (4.31%) at 11,383.98, its biggest one-day fall since December 2008. The S&P 500 fell 60.21 points (4.78%) at 1,200.13. The more than 10% drop on the index since 29th April means the index has entered what is known as a ‘correction’. The Nasdaq tanked 136.68 points (5.08%) at 2,556.39.
Markets in Asia joined the global rout as the European and US markets closed with deep cuts overnight on signs of a faltering global economy. The development sparked worries of a double-dip recession across the developed as well as developing world.
The Shanghai Composite fell 1.78%, the Hang Seng sank 4.07%, the Jakarta Composite tumbled 5.01%, the KLSE Composite fell 1.31%, the Nikkei 225 declined 3.36%, the Straits Times slipped 2.63%, the Seoul Composite declined 2.95% and the Taiwan Weighted tanked 4.11% in early trade.
Back home, weeks after being pronounced guilty of abusing its dominant market position by the Competition Commission of India (CCI), the National Stock Exchange (NSE) has settled a trading software dispute with its fierce rival Financial Technologies (FTIL).
“National Stock Exchange and Financial Technologies settled all their disputes in relation to a suit in the Bombay High Court in this matter,” FTIL said in a regulatory filing ON Wednesday. The two filed ‘consent terms’ for the settlement on Tuesday, the filing further said.
The case relates to irregularities in the books of accounts of the company dating back to 2007-08 that were committed to lure investors
Mumbai: The Securities and Exchange Board of India has imposed a fine of Rs1.25 crore on R Shivagurunathan, vice-president of finance and accounts and chief financial officer of Pyramid Saimira Theatre Ltd (PSTL), for indulging in fraudulent and unfair trade practices.
The matter relates to irregularities in the books of accounts of the company and its showing inflated profits and revenues in financial statements for 2007-08. Pyramid Saimira’s directors were charged with luring the general public to invest in the shares of the company based on such false financial statements, PTI reports.
“After taking into consideration all the facts and circumstances of the case ... it has been decided to impose a penalty of Rs1.25 crore under Section 15 HA of the SEBI Act which will be commensurate with the violations committed by the noticee (R Shivagurunathan),” the market regulator said in an order on Thursday. Section 15 HA has provisions for imposing penalties in case of fraudulent and unfair trade practices.
Last week, PS Swaminathan, the company’s promoter and managing director, was also fined by SEBI in the same case.
Mr Shivagurunathan was vice-president of finance and accounts and CFO of Pyramid Saimira during the period when the irregularities took place and it is alleged that he was also responsible for publishing false and misleading financial results of company. SEBI initiated an inquiry into these irregularities in November 2009 and a show-cause notice was issued against him in April 2010.
Pyramid Saimira claimed to have entered into lease/hire agreements with 765 theatres in various states as on 31 March 2008, and with 802 theatres as at the end of June 2008. However, during investigations it was able to show copies of only 257 such agreements.
The market regulator also found that no money was paid by Pyramid Saimira to some theatres for creation of security deposits. SEBI also observed that Mr Shivagurunathan failed in his duty to exercise due care and diligence and allowed the company to fabricate the figures and making false disclosures.
RBI panel on bank customer services describes several improvements that can improve banking processes
The much-awaited report on bank customer services by a Reserve Bank of India-appointed committee has made several proposals like simplifying account opening forms, lowering charges for services and using SMS and email to communicate with customers that could go a long way to help customers.
These are in addition to a host of major recommendations on home loan rates, facilities for senior citizens and pensioners, education loans and the involvement of bank boards to strengthen customer services.
Moneylife has consistently campaigned for improvement in banking services for customers and pushed hard for the timely publication of the report by the special committee which was headed by M Damodaran, former chairman of the Securities and Exchange Board of India.
The committee was set up over a year ago, and it submitted its report in the first week of July, only after the Karnataka High Court threatened to summon the RBI governor to explain the delay in the completion of the work.
Describing various initiatives, the report says banks should use SMS and e-mail to inform customers in case the account breaches the minimum balance and the charges applicable for not maintaining the balance. It says that penal charges should be in proportion to the shortfall of balance.
It has also proposed uniform account opening forms, as customers relocate often these days and the procedure followed by banks and the format for opening accounts differ from bank to bank causing inconvenience.
The committee has recommended increasing the ceiling of insurance cover on bank deposits from Rs1 lakh currently to Rs5 lakh.
On 'No Frills Accounts', the committee says the existing guidelines for opening these accounts require to be simplified to enable rapid fnancial inclusion.
About demand drafts, for which customers have to pay sizeable amounts even for a DD of small value, the committee recommended that banks should consider having a tear-away draft of definite denomination, or make electronic transfer of draft amount and issue a tear-away receipt which would reduce the time and cost for the user and the bank. "In the mean time, there could be pre-paid instruments of pre-determined value available to customers at a reasonable price."
The committee also recommended that receipt/acknowledgement should be provided on the cheque drop box along with the image of the cheque, as such facility offers convenience for banks (besides cost saving). The banks do not consider the advantages derived using the process whenever there is a dispute with the customer.
It also suggested that "the users (utilities, airlines, railways, etc) of electronic bank platforms for making collections may offer small discounts to their customers to favour electronic payments. This would result in substantial savings to them in cash management."
The committee has recommended that the Indian Banks' Association consider a toll-free Common Call Centre number (like Dial 100) for all banks. A customer would ring that number and thereafter get diverted to the bank concerned.
Addressing the growing complaints of customers relating to credit defaults, the committee said banks should be extra careful while reporting defaults. "Banks should be doubly careful while reporting a borrower as defaulter to the Credit Information Bureau. Banks should ensure that any representation from the customer in this matter is processed expeditiously."
The committee in its report stated that "exchange facilities for soiled/torn notes is a right of every citizen using such facilities and RBI, through its agents, should ensure that no holder of sovereign currency note is turned away at a bank counter when exchange facility is desired, irrespective of whether the person tendering the note is a customer or not."
The panel also recommended educating masses in the usage of technology in banking through the media and financial inclusion through branch expansions in the North-East.